What is a NDA (NonDisclosure Agreement)?

NondisclosureAgreement2A NonDisclosure Agreement (NDA) or Confidentiality Agreement is a written agreement where one or more parties agree to keep information that is disclosed confidential. Generally a NDA will be used when one party wants to disclose confidential information to a second party. Occasionally, a mutual NDA will be needed if both parties intend to disclose confidential information to each other.

Patent Law and Disclosures
Prior to the enactment of the America Invents Act (AIA), the United States provided a one year grace period which requires that within one year after certain activities, such as a public disclosure of the invention, a patent application must be filed or the inventor is prohibited from filing a patent application. The AIA made changes to the law which raised doubts about how and under what circumstances the one year grace period applies. The new AIA provisions have not yet be interpreted been a court.

Therefore, it is now best to file a patent application in the U.S. before any non-confidential disclosure. Further, most foreign countries do not provide a grace period and require a patent application to be filed before any public disclosure. Therefore, in order to best protect your ability to seek patent protection, it is a best practice to have a NDA signed by any person or party that you intend to disclose your invention to before a patent application is filed. However, if a disclosure has been made without an NDA, check with a patent attorney, as you still may have an option to file a patent application.

Examples Scenarios
While the safest approach is to have a patent application filed at the earliest time before any disclosure, there may be scenarios where you believe it is necessary to disclose an invention or other confidential information to a third party before a patent application is filed. For example, it may be necessary to engage an engineer to assist in creating CAD drawings of your invention. Further, it may be necessary or desirable to work with a manufacturer or designer to develop a prototype of the invention before filing a patent application. The inventor may also need to disclose the information to bankers, venture capitalist, other financial backers, or potential business partners in order to move forward with the inventors business or to otherwise exploit the invention. In these and other scenarios it is important that the inventor or invention owner obtain a signed NDA from the party that is to receive confidential information about the invention so that the disclosure does not negatively impact your ability to seek patent protection.

NDA Provisions
A NDA generally has several components. A NDA will identify the parties to the agreement. It will identify the information that the disclosing party(ies) deem confidential. It will identify information that will not be considered confidential, if any. It will require that the receiving party maintain the information disclosed by the disclosing party in confidence and to take reasonable steps to ensure that the information is not disclosed. Often the NDA provides provisions that the information can used for (1) specific purpose, such as for the purpose of evaluating potential business and/or investment relationships with the Disclosing party or (2) more generally, only for the sole and exclusive benefit of the Disclosing Party.

Some NDAs have a specific time frame where the NDA is effective, such as for 3 years. Other NDAs provide a time frame that extents indefinitely.

Trustworthy Receiving Parties
NDAs are not self-enforcing. Therefore, you should endeavour to disclose confidential information only to those that are trustworthy. If the party that you are disclosing to breaches the NDA, you will be forced to hire a lawyer and take action against that person. This can be disruptive and time consuming. Therefore, it is generally worth investigating the trustworthiness of anyone you will be disclosing confidential information to under an NDA.

Having a written NDA signed is an important first step before disclosing confidential information to others before a patent application is filed.

Photo credit to flickr user DaveBleasdale under this creative commons license.